Freeport-McMoRan 2007 Annual Report Download - page 56

FREEPORT-McMoRan COPPER & GOLD INC.
2007 Annual Report
54 Financial & Operating Information
Management’s Discussion and Analysis
year. For this reason, no adjustment was required to be made as a result of
the quarterly common stock dividend paid on February 1, 2008. Holders
may elect to convert at any time prior to May 1, 2010, at a conversion rate
equal to 1.3605 shares of common stock for each share of 6 3/4% Mandatory
Convertible Preferred Stock. On December 27, 2007, FCX declared a regular
quarterly dividend of $1.6875 per share of FCX’s 6 3/4% Mandatory
Convertible Preferred Stock, which was paid on February 1, 2008, to
shareholders of record at the close of business on January 15, 2008.
Annual preferred stock dividends on our 5 1/2% Convertible Perpetual
Preferred Stock and 6 3/4% Mandatory Convertible Preferred Stock total
approximately $255 million.
Cash dividends paid to minority interests in 2007 totaled $967 million
reflecting dividends paid to the minority interest owners of PT Freeport
Indonesia and our South America mines, including $288 million for the
minority partners’ share of the dividend paid by Cerro Verde in December
2007. Cash dividends of $161 million in 2006 and $125 million in
2005 primarily reflect dividends paid to the minority interest owners of
PT Freeport Indonesia.
We have restricted payment covenants in our $1.5 billion senior
revolving credit facilities and the $6.0 billion in senior notes used to
finance the acquisition of Phelps Dodge, and also in our 6 7/8% Senior
Notes. The amount available for dividend payments, purchases of our
common stock and other restricted payments as of December 31, 2007,
was approximately $5.1 billion under the $1.5 billion senior revolving
credit facilities, approximately $8.4 billion under the $6.0 billion in senior
notes and approximately $7.4 billion under the 6 7/8% Senior Notes.
DEBT MATURITIES AND OTHER CONTRACTUAL OBLIGATIONS
Below is a summary of our total debt maturities at December 31, 2007:
2008 2009 2010 2011 2012 Thereafter
Equipment loans and other $ 31 $ 49 $ 22 $ 22 $ 74 $ 85
Senior Notes – – – 119 – 6,809
$ 31 $ 49 $ 22 $ 141 $ 74 $ 6,894
Less Than Years Years
Total 1 Year 2 - 3 4 - 5 Thereafter
Scheduled interest payment obligationsa $ 5,399 $ 580 $ 1,158 $ 1,138 $ 2,523
Reclamation and environmental obligationsb 8,826 249 533 421 7,623
Take-or-pay contractsc 2,286 1,536 542 184 24
Operating lease obligations 103 26 45 30 2
Atlantic Copper obligation to insurance companyd 95 11 21 21 42
PT Freeport Indonesia mine closure and reclamation funde 19 1 1 1 16
Total contractual cash obligationsf $ 16,728 $ 2,403 $ 2,300 $ 1,795 $ 10,230
a. Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2007, for variable-rate debt.
b. Represents estimated cash payments, on an escalated basis, associated with reclamation and environmental activities. The timing and the amount of these payments could change as a result of changes in regulatory
requirements, changes in scope and costs of reclamation activities and as actual spending occurs. Refer to Note 15 for additional discussion of environmental and reclamation matters.
c. Represents contractual obligations for purchases of goods or services that are defined by us as agreements that are enforceable and legally binding and that specify all significant terms. Take-or-pay contracts primarily
comprise the procurement of copper concentrates and cathodes ($1.7 billion) and transportation ($270 million). Some of our take-or-pay contracts are settled based on the prevailing market rate for the service or
commodity purchased, and in some cases, the amount of the actual obligation may change over time because of market conditions. Obligations for copper concentrates and cathodes provide for deliveries of specified
volumes, at market-based prices, to Atlantic Copper and the North American mining sales company. Transportation obligations are primarily for South American contracted ocean freight rates and for North American
natural gas transportation.
d. In August 2002, Atlantic Copper complied with Spanish legislation by agreeing to fund 7.2 million euros annually for 15 years to an approved insurance company for an estimated 72 million euro contractual obligation to
supplement amounts paid to certain retired employees. Atlantic Copper had $72 million recorded for this obligation at December 31, 2007.
e. Represents PT Freeport Indonesia’s commitments to contribute amounts to a cash fund designed to accumulate at least $100 million by the end of our Indonesian mining activities to pay for mine closure and
reclamation.
f. This table excludes certain other obligations in our consolidated balance sheets, including estimated funding for pension obligations as the funding may vary from year-to-year based on changes in the fair value of plan
assets and actuarial assumptions and Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48), liabilities
totaling $115 million that relate to unrecognized tax benefits where the timing of settlement is not determinable. This table also excludes purchase orders for the purchase of inventory and other goods and services that
represent contractual obligations, as purchase orders typically represent authorizations to purchase rather than binding agreements.
In addition to debt maturities shown above, we have other contractual
obligations, which we expect to fund with projected operating cash flows,
available credit facilities or future financing transactions, if necessary.
A summary of these various obligations at December 31, 2007, follows: